On the occasion of World’s Health Day, we would like to draw investors’ attention to the health of the economy and wholesome supplements for a robust investment portfolio.
Similar to the six vital nutrients required for good health, there are six pillars that uphold the economy. Solid manufacturing and industrial growth since the 2009 recession as well as better job prospects testify to economic well being. But what is the secret of this economic improvement and the resultant surge in stock prices?
We have figured out the mantra for good economic health. First, we picked six essential market nutrients in the form of sectors and then zeroed in on stocks that are in the pink through our Zacks Stock screener.
All these are Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks with higher market caps in their respective sectors. Other parameters include positive current-year earnings estimate revisions over the past 60 or 90 days, positive current-year EPS growth, positive earnings surprise over the trailing four quarters, and top Zacks Industry Rank.
More importantly, these stocks crushed the broad market returns over the trailing one-year period.
Vitamins: Consumer Sector
About 70% of overall economic growth comes from consumer spending, which grew at the highest pace in more than eight years in the fourth quarter of 2014 buoyed by lower gasoline prices. Though the economy seems to have lost momentum in the first quarter of 2015 due to frigid temperatures and greater propensity to save money, consumer confidence – measured by the Conference Board – jumped to 101.3 in March from a revised 98.8 in February.
Rising consumer confidence suggests that spending will strengthen in the months ahead, taking consumer sector higher and giving the economy its regular doses of vitamin. Within this sector, a diversified international family entertainment and media leader The Walt Disney Company (DIS - Analyst Report) is a great pick for investors.
This Zacks Rank #2 company has seen rising estimates of 5.4% over the past 90 days with an expected earnings growth rate of 13.40%. Disney beat earnings estimate in all of the past four quarters with an average surprise of 10.64% and has a solid Industry Rank in the top 26%, suggesting its potential for solid growth in the months ahead. The stock gained 33.5% over the trailing one-year period.
Proteins: Financial Sector
Like protein, the financial sector, carries out a huge array of functions through its banks and financial institutions. The sector facilitates growth in every part of the country. Overall loan growth is expected to remain tepid. But improvements in auto, credit card and student lending, rising commercial real-estate lending, easing lending standard, steadily improving credit quality, litigation settlements, heightened M&A and IPO activities, and stable balance sheets are fueling optimism in the broad sector.
Further, major U.S. banks have passed the Federal Reserve’s latest round of annual stress tests, confirming the industry’s advancement in terms of absorbing future losses. With that being said, Northern Trust Corp. (NTRS - Analyst Report) could be the outperformer in the banking space. It is a leading provider of asset management, fiduciary, banking, asset servicing and fund administration solutions for corporations, large institutions and individuals worldwide.
The Zacks Consensus Estimate for 2015 has been revised up from $3.66 to $3.72 over the past 90 days and represents substantial year-over-year growth of 9.53%. This is higher than the industry average growth of 6.9%. Further, this Zacks Rank #2 company falls in a solid Industry Rank in the top 32% and delivered positive earnings surprises in two of the last four quarters, with an average beat of 3.08%. The stock added 12.1% in the same period.
